AT&T Co’s newly-announced entry into the low-cost analogue videophone market reflects the company’s determined belief that there is a mass consumer market for the product and that this time it is going to make a go of it. The company is even going to the extent of making the 9 by 9 by 8.5 box available on overnight loan, once it becomes available in its own phone centres in May. The Videophone 2500, the company says, is the first of a series of video products and services that it will be launching over the coming months and, at $1,500, there is the possibility that it will manage to worm its way into homes fairly well-off homes that is. The obvious next step would be to adapt the phone to work on the ISDN network, though this would probably mean abandoning the proprietary data compression techniques developed by AT&T’s Bell Laboratories and Compression Labs Inc of San Jose, which lie at the heart of the new product’s practicability. Anyone that wandered round Geneva’s Telecom ’91 will have seen a wide range of videophones designed to work over ISDN channels at 64Kbps. To be frank, the quality of the pictures was not particularly good, especially around areas of the picture which move, since compression algorithms lead to a degree of unavoidable quantisation.

Annoying

It is a trait that can be particularly annoying when trying to watch someone’s lips. AT&T’s videophone, for use with the analogue network has even less bandwidth to play with. Its 3.3 colour liquid crystal display is capable of being refreshed at up to 10 times a second, according to the company, but this is cut drastically as the image begins to move. At its worst, the screen will be updated only twice every second. Success in the fireside market will depend on the product having that indefinable something which makes potential customers touch and go want. This Nintendo Gameboy effect has been the saviour of quite a few dubious products in the past, but is notoriously fickle. So, until the public and a few reviewers actually get their hands on the thing, we shall be lacking the most important factor in determining its success. AT&T’s basic premise, in choosing now as the time to go ahead with the project, is that the public has at last become sophisticated enough to appreciate its use, though that very sophistication may endanger its chances of success, according to a number of analysts. Steve Sacegari at San Jose-based Dataquest is unequivocal about his doubts over the potential market for the thing – the market research firm simply does not believe that there is one in the short term.

By Chris Rose

Sacegari cites three reasons for its projected failure. The first is the psychology of the domestic user who will expect picture quality akin to television and will be sorely disappointed. Second comes the hoary old argument about the requirement for two phones rather than just one – an argument that was used against the original telephone. Third, and perhaps most important, is the question of pricing. Although AT&T’s offering is by far the lowest priced videophone to hit the streets, Sacegari says that $1,500 is simply too high and right at the top end of the techno-gizmo market. The kinds of desires that lead people to buy something like a video camera will simply not bear the expense. As a result, Dataquest’s predictions for the market are sales of a measly $1.2m this year – that’s 800 units. Eventually, however, the company does see demand beginning to take off – the total market should be $30m in 1996 and $100m by the turn of the millennium. Sacegari is more enthusiastic about the ease with which the company will be able to move the technology to the personal computer – he says that one of the forthcoming products that AT&T is refusing to talk about at the moment is a desktop personal computer costing under $1,000 – this, he says, will appear in less than six months. In fact, Compression Labs recently has done just the same thing, though it has chosen the Apple Computer Macintosh environment for its product. But, lest we forget, AT&T and Comp

ression Labs will not be alone in this market for long. Amstrad Plc has already committed itself to build a product based around compression technology and chips devised by GEC Plc’s Marconi division. A prototype was glimpsed on the BBC’s Money Programme just before Christmas, and apparently the great and the good were invited to see a working example behind closed doors at Telecom ’91 in Geneva. The two British companies are continuing to be tremendously tight-lipped about developments ahead of the official launch, though they do say that a product should be ready around September of this year, and Amstrad is sticking to its projected price of UKP500. Amstrad says that its machine’s capabilities will be comparable with those displayed by the AT&T box. More significantly, a spokesperson for Marconi said that Amstrad was only going to be one user of the compression technology and added that the company was in active discussions with a number of PTTs regarding the use of its chippery in new products. Let us assume for a moment, then, that either of these products does take off – will it significantly hurt the embryonic ISDN market?

Workplace

To start with, it is worth remembering that ISDN is very much a business service at the moment and is likely to remain so for some while. But Keith Mallinson, senior analyst at Yankee Group Europe, says that if the analogue videophone market does become popular in a mass market kind of way, there is the distinct possibility that the phones will move into the workplace from the home, causing significant disruption to the development of the ISDN videophone. Yes, says Sacegari, but the very fact that ISDN is digital means that in the long term we can see the electronics become cheaper than the analogue equivalent. So, although ISDN video-kit is expensive at the moment, advances in digital signal processing will turn the price tables on the analogue phones. For users and manufacturers at the moment though, the talk of a sub-UKP500 videophone seems a little far-fetched. We’ll see. One caveat that Sacegari does make, is that he expects the ISDN market to evolve more quickly in Europe and Japan than in the US, where regional fragmentation will cause the market to stall. Perhaps that is why AT&T is being cautious about its plans to launch the Videophone 2500 overseas. Even before AT&T’s phone is released, however, it is being made a political football, Newsbytes reports. A Chicago Alderman running for Congress, Bobby Rush, has called on AT&T to prevent such phones from dialling sexually-explicit 900 numbers. Rush said that he had bought the matter to Federal Communications Commission’s attention – if it acts, there goes the biggest early source of demand…